Current market forecasts suggest volumes will remain negative indefinitely, leading the market to question whether the sector’s long period of capitalization is over. Per capita alcohol consumption in the U.S. has declined after decades of steady growth, only the third significant decline in the last century, Investing.com writes.
Why has alcohol consumption declined?
Barclays believes the decline is cyclical rather than structural, noting that such a forecast does not take into account historical patterns and international comparisons. Based on income levels, Americans drink less than their peers in other rich countries. And this is not due to behavioral factors, but rather to the higher age of legal drinking while driving.
The idea that young consumers are driving the decline is also exaggerated, according to the bank. Alcohol use among those under 21 has been declining for decades because of tighter controls. After age 21, consumption patterns remain generally stable. Although the incentive not to drive drunk cuts across all age groups.
Other putative pressures seem limited. The use of GLP-1 drugs for weight loss has had only a marginal impact on alcohol demand, says Barclays. That’s partly because users of the drug are mostly older and female, while alcohol use is concentrated among younger men. Data on cannabis legalization does not show consistent substitution for alcohol.
Barclays also points to weakening consumer confidence, inflation and rising interest rates. Alcohol is one of the most telling categories among consumer necessities, and its decline reflects reductions in other non-essential spending.
Consumption of premium alcohol will recover
Recent data show early signs of stabilization. Nielsen metrics and card spending data indicate volume and value growth in January, with growth skewed toward premium products.
Barclays expects US consumption to move closer to global levels, with spirits benefiting most if premium trends resume.
